Ecommerce brands should ideally begin their festive season preparations at least three to four months in advance, says Shipway’s Sandeep Pati
Brands should encourage COD orders during festive sales as many still prefer cash for their purchases. But it is advisable not to offer COD for orders above a specific amount
Shipway’s suite of solutions including fraud detection, AI-driven carrier allocation engine and early COD remittance can help brands make the most of the ecommerce opportunity beyond metros
In just a couple of months, the Indian ecommerce ecosystem will be in the throes of the festive season. The end of the fiscal year’s second quarter typically brings a lot of optimism not just for ecommerce marketplaces, but also the host of direct-to-consumer (D2C) brands that have emerged in the past few years. This is, after all, the peak online shopping season.
But over the past few years, the ecommerce ecosystem is faced with one big question: how to make the most of the India opportunity beyond the metros.
While D2C brands have managed to capture a slice of the consumer base in metros and Tier 1 cities thanks to their marketing activities, it takes a lot more than promos and ads to tap the latent potential of consumers in India’s Tier 3 cities and beyond.
For one, unlike metros, ecommerce brands, especially those in their early stages, have to counter a myriad of challenges in these untapped market segments. This is not just about the lack of brand awareness, but the very real problem related to logistical glitches, lack of road infrastructure and connectivity in Tier 3+ towns.
“In Tier 2 and 3 markets, Cash on Delivery (COD) is usually a preferred mode of payment among customers. Failure to provide it could adversely affect your bottom line, yet its provision may also lead to instances where orders are not accepted upon delivery,” observes Sandeep Pati, AVP of marketing and partnerships at logistics platform Shipway.
To counter logistical hiccups, players such as Shipway have stepped in to streamline logistics and offer courier aggregation, shipping intelligence, order tracking and other tech-led solutions.
Founded in 2015 by Gaurav Gupta and Vikas Garg, the Gurugram-based logistics SaaS startup is bullish about D2C brands capturing a swathe of the opportunity in Tier 3 and beyond.
Drawing on seven plus years of experience in the ecommerce industry and helping renowned D2C players like Lenskart, Libas, Juicy Chemistry and BlueStone, Shipway believes that the key to conquering the Tier 3+ market lies in how brands get ready for the festive season rush.
Formulating a robust pre festive season strategy and building capabilities to capitalise on the surge in demand will be critical for brands across categories, Pati tells Inc42.
Preparation Is Half The Battle
“Ecommerce brands should ideally begin their festive season preparations at least three to four months in advance to ensure a smooth and successful campaign,” says Pati.
Each brand needs a distinct strategy, given that the logistics challenge varies for each product category and will need to be tailored according to consumer awareness of the brand.
For instance, a relatively new brand needs to start its festive season preparation well before established names and invest heavily in creating brand awareness. This, Pati notes, is possible through localised marketing efforts.
“Consumers in Tier 3+ towns may have a stronger preference for content in their regional languages and online retailers need to cater to this,” he says.
But there are other unique challenges when selling to Tier 3 cities. Despite the rising adoption of UPI, there is a trust deficit between consumers and online brands or marketplaces in Tier 3/4 and beyond. So much so that a Rakuten Insights survey from June 2022 revealed that 62% of online shoppers in India prefer COD over other payment methods.
But as many D2C brands might testify, the problem is that since there is no obligation to collect the order at the time of cash delivery, some orders may end up as RTO or ‘Return to Origin’. This is particularly expensive for brands serving consumers in Tier 3 or Tier 4 cities.
While brands cannot completely do away with COD, a few strategies can help them mitigate inherent risks with such orders.
“Incentivise prepaid orders at checkout by highlighting savings for upfront payments and showing potential losses for COD. Additionally, consider not offering COD for orders above a specific amount,” Pati recommends.
Shipway’s COD to prepay solution offers businesses the option to send WhatsApp and SMS notifications to inform them of last-minute discounts and encourage prepayments.
But given the strong affinity towards cash, COD orders are bound to happen. For this, Shipway offers early cash remittance to help brands improve their cash flows. Pati mentioned that while it typically takes brands about a week to receive cash remittance from courier partners, the platform is able to streamline the process. “ We provide faster remittance within 2, 3, and 4 days,” he added.
These markets are also more prone to RTOs due to a variety of reasons besides COD and Shipway is committed to helping brands counter them with its suite of RTO solutions.
The startup’s AI-powered fraud detection tool analyses user data (purchase history, address check, pincodes etc) and warns brands of potential frauds. For instance, if the customer’s address is not concrete, the tool detects it and marks it as a high risk order. Orders are primarily categorised under three buckets – high risk, medium risk and low risk.
Subsequently, brands have the option to review manually and either hold or confirm these orders. This is a huge cost saver for brands, whereas earlier they would have to bear the cost of reverse logistics, which is usually higher than deliveries.
Shipway also provides branded tracking pages, empowering businesses to engage with consumers throughout the logistics process transparently. Businesses can easily track and monitor their shipments and consumers also get updates about their orders through channels such as WhatsApp, SMS and email. In case they miss out on an order, customers can use the tracking page to request for a reattempt.
Additionally, Pati mentioned that Shipway has a dedicated support team in place that helps brands to seamlessly navigate through the entire shipping journey. The team is responsible for making calls to the end customer to enquire about their orders in case they reject it or have not received it. Based on their response, the team manually adds a reattempt request on behalf of the brands.
Reaching The Last Mile
Of course, payment and checkout strategies are only as good as the brand’s approach to handling demand surge, which is typical in the festive season.
Consumers are not just buying for personal consumption but also for gifting, which adds another level of complication to order management, since brands may not have the data about the actual end user of their products. Nevertheless, there are ways that brands can make the most of the rush — once again by preparing themselves with data from previous years wherever available.
Higher order volumes can lead to inefficient order fulfilment especially for brands that are reliant on marketplaces. Demand forecasting is especially critical for such brands.
Pati recommends that brands should analyse past sales data and customer behaviour during previous festive seasons to identify patterns and trends. Primary and secondary market research can help D2C brands understand consumption trends, consumer preferences, and competitor strategies.
Implementing just-in-time inventory management systems can help minimise excess stock and optimise warehousing costs. Demand fluctuations are highly likely when it comes to the festive season, since trends and seasonal consumption drives purchases. Armed with demand forecasting data, brands can collaborate with manufacturers in specific geographies to adjust production targets on the go.
Demand mapping is also key for brands to minimise logistics overheads and challenges. With a clear view on where orders are likely to come from, D2C businesses can look to automate their delivery operations — whether through native stores or third-party marketplaces.
During the festive season, customers also expect brands to have an extensive reach so that they can send gifts to family members across the country. Eventually, a wider delivery range will make customers order more and rely on you for future orders, explained Pati.
Shipway allows brands to select from over 20 carriers across 29K+ pin codes, helping them deliver pan India. Its AI-driven carrier allocation engine also ensures that brands are matched with the most suitable courier partner in the region, with the shortest Estimated Time of Delivery (EDD). The 3PL logistics provider claims that this system enables brands to enhance cost efficiency and achieve potential savings of up to 20% on logistics costs.
Serving Semi Urban, Rural Markets: The Way Forward
As semi urban and rural Indians embrace online shopping, industry experts believe that these markets will spearhead the next wave of ecommerce growth.
With 70% of Indians residing in rural areas, there is massive untapped potential for ecommerce to flourish and the day when it becomes the hub for both big and small brands, may not be far off.
More than 373 Mn rural Indians use the internet today, and the number of online shoppers is expected to surpass 500 Mn by 2030.
Rural users are expected to drive the next wave of marketplaces and online brands, but building trust is still essential to make the most of these new-to-ecommerce users.
“Consumers in Tier 3+ towns may have limited exposure to new products and brands compared to the urban cities. They rely more on word-of-mouth recommendations, local retailers and online platforms to discover new products. Brands must look out for these trends to grow in these markets,” adds Pati.
When it comes to logistics, there are certain hurdles that can impede trust development. For instance, the operational overhead of maintaining warehouses in Tier 3 regions can be quite challenging, often leading to order delays or misplaced products. As a result, replicating the gold standard of same day/next day deliveries popularised by Amazon and adopted by others may be hard to achieve. For this, inventory has to be geographically proximal to the consumers.
Nevertheless, the landscape is evolving as several logistics players such as Shipway, Pickrr, Shiprocket and the like are stepping up by providing a plethora of offerings, such as AI-powered inventory management, advanced forecasting and expansive on-ground warehouse capabilities that span across India. Thanks to these enablers, ecommerce brands can make the most of the festive opportunity that Tier 3+ market segments will undoubtedly present.